European shares set 14-month highs

Banks and miners advance; Mediaset upgraded at Citigroup

SarahTurner

Editor's note: A previous version of this story gave an incorrect end-of-day percentage move for Allied Irish Banks. The story has been corrected.

LONDON (MarketWatch) -- European shares notched 14-month highs on Wednesday, with banks and miners leading the way higher on signs the economic outlook continues to improve.

The pan-European Dow Jones Stoxx 600 index (SXXP) ended the last full trading session before Christmas with a gain of 0.3% to close at 251.90, after setting a session high of 252.95.

Wednesday's advance took the index over its previous 2009 closing high of 251.34 set on Nov. 16 and back to levels not seen since October 2008.

Including a 2% gain made in the first two sessions of the week as traders count down to the Christmas break and the end of the year, the index is up by 27% year-to-date.

Banks and miners -- perceived as some of the companies most leveraged to an improving economic backdrop -- have put in an even better performance than the overall market so far this year with the mining sector up nearly 95% and the banking sector up 46%.

On the regional level, the U.K. FTSE 100 index (UKX) rose 0.8% to settle at 5,372.38 the German DAX index (1876534) climbed 0.2% to end at 5,957.44 and the French CAC-40 index (PX1) closed 0.3% higher at 3,910.75.

Asian shares ended higher on Wednesday.

U.S. stocks were flat, giving up early gains after data showed November new home sales fell to their lowest level in seven months. Read Market Snapshot.

In the U.K., seasonally adjusted net mortgage lending increasing 3.3 billion pounds ($5.3 billion) in November compared to a 3.2 billion pound increase in the previous month, the British Bankers' Association said.

Even as data improve, central banks are continuing to target many policy measures at supporting the global economy and minutes from the latest monthly meeting of the Bank of England's Monetary Policy Committee out Wednesday showed unanimous agreement on current bond purchases and rates. Read more on Bank of England decisions.

"The Bank of England is clearly keeping all its options open in order to protect the recovery process," said Philip Gillett, trader at IG Index.

Gillett said it's hard to ignore the fact that stocks are at multi-month highs but said he's cautious about using this week's pre-holiday advance as a sign for continued stock market gains given it has occurred amid low volumes.

European corporate news was also thin on the ground in the run up to the holidays although Maurel et Prom (MAU) rose 4.2% in Paris after saying it has hit oil in Gabon.

Meanwhile, Mediaset (MS) shares rose 1% after it was upgraded to hold from sell at Citigroup.

The broker said short-term tailwinds are stronger than structural headwinds, with Mediaset likely to benefit from consolidation in Spain, as well as a favorable Italian political environment.

Shares of Spanish television firms Telecinco (TL5), up 1%, and Antena3 (A3TV), up 1.6%, rose after both firms were upgraded to hold from underperform by Jefferies International.

"The likely consolidation of the Spanish TV market from four into two players will deliver over the medium-term earnings upgrades from pricing power, cost savings and optimization of programming across the commercial channels," the broker said.

Volkswagen (VOW3) preferred shares fell 2.8% on the first day of trading in the DAX index for the stock while the automaker's ordinary shares (VOW) rose 2.4%.

The preference shares take the place of the firm's ordinary shares in the DAX, a situation that followed Qatar Investment Authority exercising of its share option, noted analysts at Standard & Poor's Equity Research.

"We expect continued ordinary downside pressure as the preference becomes the only liquid, indexed share, with little reason for ordinary institutional investor ownership," they added.

The bank's chairman, Dan O'Connor, reaffirmed that the bank will need to raise more capital in the next year at the same time as he expressed "deep regret" to shareholders over the activities that led to the group needing taxpayer support.

It's still unclear how much capital the bank will need to raise in the coming year, he said.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.